Barclays eyes quitting agricultural commods trading

LONDON Wed Nov 28, 2012 1:44pm EST

LONDON Nov 28 (Reuters) - Barclays is considering quitting trading of agricultural commodities due to the reputational risk the activity can pose, its head of investment banking said on Wednesday.

Barclays is reviewing all parts of its investment banking and other operations and has said it will quit areas that could harm its reputation.

It is among several banks to come under fire for allegedly speculating on food prices, which critics say has pushed up food prices and fuelled unrest in some poor countries.

Barclays is on high alert for any reputational risk after being fined in June for rigging Libor interest rates, which sparked fierce criticism of its culture and prompted its chairman and chief executive to quit.

Rich Ricci, head of corporate and investment banking, has previously said the bank could halt its tax advisory business due to potential reputational damage, and said soft commodities trading could be cut too.

"Another good business for us is agricultural commodities trading. Are there elements of that business from a reputational risk perspective that we simply want to consider and think about whether we want to pursue them or not?" Ricci told a panel of UK lawmakers as part of an inquiry into banking standards.

"Are there things that historically may have been at the aggressive end or aren't fit for purpose any more simply for reputational risk... things that we just don't want to do any more because we've seen the damage that reputational risk has?"

The bank declined further comment on what activities could be affected.

Several German banks, including Commerzbank, have this year restricted their investments in agricultural products, but banks elsewhere have been slower to curb activity despite heavy lobbying by groups such as World Development Movement (WDM), which has been critical of Barclays.

Barclays is assessing all parts of its investment bank as part of a review by new Chief Executive Antony Jenkins, and last week quit open outcry metals trading in London.

Barclays, Deutsche Bank and J.P. Morgan have all built up strongly in commodities in the past decade to challenge established veterans Goldman Sachs and Morgan Stanley. Those five banks control about 70 percent of the commodities trading pot.

But commodities trading turnover for the 10 biggest investment banks has tumbled 20 percent in the first nine months of this year, and the profitability of operations could be squeezed further by tougher regulations.

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